JOHN DESMOND FLEMING v. L & C (NOMINEES) LTD

HCA 1221/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 1221 OF 2010

------------------------

------------------------------------------------------

REASONS FOR DECISION ON COSTS

------------------------------------------------------

1.  This matter came before me on the 30 May 2013 in the form of two summonses and three appeals against the Master’s decisions on other interlocutory applications.

2.  It is in order to reflect upon the priorities as perceived by the parties that I should outline the appeals first.  One is against the Master’s decision to order the plaintiff in action HCA 1221 of 2010 to give security for costs in the sum of HK$360,000.00, and the other plaintiff in action HCA 1223 of 2010 to give security in a like sum.  Both plaintiffs are ordinarily resident in Australia.  There is also an appeal against the Master’s dismissal of the plaintiff’s application that the defendant give security for costs in respect of the Counterclaim.

3.  The two undecided summonses (one by each plaintiff) were adjourned to be heard by the Judge before whom the appeals from the Master were to be heard.  One was to obtain in effect, summary judgment; and the other to strike out the Defence and Counterclaim.  Although there are two actions, they have the same cause of action, based on the same facts and the same evidence. They should have been consolidated at the outset.

4.  Having read the relevant papers it was apparent that the plaintiffs had a well‑founded claim, that the Counterclaim was almost ‘tongue‑in‑cheek’ and had minimal substance, and the parties had in 2010 and 2012 indulged in some overtures, wrapped up in contentious exchanges which had, for some inexplicable reason, come to nothing.

5.  Accordingly it seemed to me that the parties, through their respective counsel and solicitors, ought now to achieve what was, or had been an attempted compromise, some time ago.

6.  They appeared to welcome this opportunity and eventually on the day of the hearing (Thursday, 30 May 2013) reached an agreement.  A document incorporating this was drawn up and signed by all legal representatives.  All the appeals and other interlocutory applications thus fell away.  The only matter on which there was no agreement was, unsurprisingly, given the somewhat pointless and wasteful litigation, the matter of costs.  I then proceeded to hear the arguments on costs from Senior Counsel for both sides.

7.  I do not need to reiterate their arguments but will content myself with setting out each aspect and my reasoning.

The costs of the plaintiff’s action

8.  The action was commenced in 2010, some ten years after the events which founded the cause of action.  The Statement of Claim, one of the messiest I have ever seen, had to be amended nearly 20 months later; the Defence, such as it was, had been served six weeks after the Statement of Claim was served.  The action having begun so late was not progressed expeditiously or sensibly.  An affidavit by the plaintiff in 1221 of 2010 (Mr Fleming’s action) purportedly in support of the summary judgment application was ten pages long, five of which were taken up with argument on law and merits which has no place in an affidavit.

9.  My own, albeit limited, consideration of the merits of the plaintiff’s claim before the hearing, indicated that the plaintiff was bound to succeed unless the Defence was able to raise a tenable argument under the Limitation Ordinance.  In the light of the form of the settlement, and what had transpired in 2010 and 2012, I had little difficulty in deciding that the plaintiff was entitled in principle to his costs.  However there were several considerations, in the exercise of my discretion, which indicated that he should not have all his costs.  There had been significant and inexcusable delay before proceedings were commenced.  Even when commenced they were not proceeded with appropriately.  Experience in litigation in Hong Kong and elsewhere, shows that delay in litigation inflates costs and sometimes causes for a party difficulties of recollection (not a feature in this case) but changes in the economics of a party and other potential problems.  This action once started should have proceeded to summary judgment promptly if it had been handled realistically and properly.  In fact, very little if anything had changed since it was commenced in September 2010 ― except the amount of paper generated and adversarial posturing.

10.  Miss Ismail for the plaintiff argued for a full costs order.  Miss Cheng for the defendants argued that the defendants should have costs in their favour.  I have set out above the basis for my decision that the plaintiff should have only 50 % of his costs.  As far as the merits of the defendant’s argument is concerned the casual observer, the man on the Shau Kei Wan tram, would say that the defendant had lost.

The costs of the Counterclaim and the application to strike it out

11.  I did not of course need to hear the plaintiff’s application.  The nature of the Counterclaim was hardly likely to attract more than minimal intellectual activity.  It had a dubious ― some would say spurious‑basis.  It purported to claim for fees for services rendered over a ten year basis.  Yet the company had ceased to be registered as a business for a ten year period which more or less corresponded to that period when it did not exist.  It had not rendered any such services even as a “shadow” or “ghost”.

12.  Some lawyers of course might be tempted to “make a meal” out of nothing as evidenced by the skeleton bill of costs put forward in respect of both the proceedings concerning the Counterclaim.  I decline to allow that opportunity to exist and ordered that there be no order as to costs.

The application for security for costs in respect of the Counterclaim.

13.  What I have already said does not need repeating.  I summarise the matter by underlining:

(1) there was no substance in the Counterclaim ― or, if some small fee could be justified, very little, which in any event was not going to occasion any worthwhile dispute; and

(2) no worthwhile litigation lawyer needed to look beyond the invoices supplied in support of it.

14.  Such a trivial aspect of the litigation does not merit a specific costs order, one way or the other.

The appeal against the security for costs order against both plaintiffs

15.  With the settlement between the parties the orders lapse and the plaintiffs are entitled to the return of the sums deposited and I have so ordered. It was perfectly proper for the orders to have been made in the first instance.  Had the litigation followed the realistic course the subject of security for costs would not have arisen.  The plaintiffs cannot have their costs of an appeal which fell by the wayside and has been subsumed in the overall settlement.  The defendants are not entitled to such costs because of the nature of the settlement.  There is no need for any such security.  They have neither won nor lost the appeals.

Orders whereby costs have been reserved

16.  In the context of the outcome of this case, it would be fruitless and inappropriate to consider all the circumstances of orders made by others at a different stage.  It would not be a proper exercise of a judicial function. The only practical order is that there should be no order for costs.

Generally

17.  Essentially a broad brush approach incorporating a proper exercise of judicial discretion is necessary.  Litigation within litigation against a background of an agreement by parties, must not lead to a detailed consideration of the merits of each party’s case though I have had to do that to some extent when dealing with the costs of the action.

18.  When the satellite litigation in the form of interlocutory proceedings falls for consideration, it important to try and reflect the spirit of compromise and the overall tenor of the settlement in the approach to outstanding matters of costs rather than take a slide‑rule and proceed as if no such settlement had resulted.